Climate change may make economic contractions more likely and severe and thereby significantly impact economic stability and living standards, according to this paper from the Federal Reserve.
The report looks at the effect of past fluctuations in temperature on the severity of economic downturns, finding a very strong link between the two. Although growth rates overall are negatively influenced by temperature changes, the severity of negative shocks to growth is affected to an even greater degree.
The paper warns that these severe contractions in economic activity may have sizable adverse effects on living standards. It also acknowledges that, while the study has assessed the empirical associations between weather and economic growth, these may differ from those associated with climate change.
This page was last updated October 22, 2021
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